Learning about the nature of production from equilibrium assignment patterns

Luis Garicano, Thomas N. Hubbard*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

8 Scopus citations


This paper exploits empirically a key insight from Lucas (1978) and Rosen (1982): that the organization of production and the distribution of earnings across individuals are jointly determined by the equilibrium assignment of individuals to firms and hierarchical positions. We study how different classes of production functions generate alternative equilibrium assignments. We then use confidential Census data on U.S. law offices to investigate the form that the production function should take to rationalize earnings patterns in legal services. We argue that earnings patterns in this industry are consistent with a production function that is characterized by asymmetric sensitivity to the skill of agents in different organizational positions, complementarity between managers' and workers' skill, and scale effects in individual skill.

Original languageEnglish (US)
Pages (from-to)136-153
Number of pages18
JournalJournal of Economic Behavior and Organization
Issue number1
StatePublished - Sep 2012


  • Assignment
  • Earnings
  • Hierarchies
  • Lawyers

ASJC Scopus subject areas

  • Economics and Econometrics
  • Organizational Behavior and Human Resource Management


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